Dialogue with the Divine Fish: Opportunities in the Crypto Industry and Cobo's "New Weapon"

Author: Qin Xiaofeng, Odaily Planet Daily

In 2022, the crypto market experienced turbulence, with many leading institutions facing severe setbacks and nearing bankruptcy, exposing limitations in risk management. However, some institutions withstood the pressure and navigated through the crisis thanks to their risk control capabilities and efficient risk management tools, among which the crypto asset custody platform Cobo stands out.

"On one hand, the rich DeFi experiences over the past two years have provided us with various insights; on the other hand, we have established a mature DeFi decision-making process and risk control management internally, filtering through layers to avoid systemic risks," explained Shen Yu, co-founder of Cobo. Cobo employs a tool called Cobo Argus for role division, creating a workflow that aligns better with the efficient governance of crypto finance.

Over the past five years, Cobo has continuously focused on crypto security infrastructure, growing from scratch to become the largest cryptocurrency custody institution in the Asia-Pacific region, with over $3 billion in assets under custody and more than 500 institutional clients choosing Cobo, making it a true "institutional crypto safe haven." Cobo Argus has also undergone brand upgrades and functional iterations, emerging with a new image.

What has Cobo learned through the storms in the volatile crypto market? Why has it chosen to productize its internal DeFi experiences and target institutional clients? Behind the transformation of its business model, what trends and structural opportunities in the future of crypto has Cobo anticipated? What new moves can we expect from Cobo in the future?

To explore these questions, Odaily Planet Daily interviewed Shen Yu for an in-depth discussion.

Odaily Planet Daily: In the past six months, Three Arrows Capital has been burdened by debt, Voyager has gone through bankruptcy restructuring, BlockFi is facing liquidity crises, and AEX, PayPal, and Huobi are also caught in the whirlpool of bankruptcy rumors… Multiple institutions have faced crises, raising doubts about the professionalism of institutional players in the crypto market. What are the inherent connections and common root causes of these incidents?

Shen Yu: The core reason for the frequent incidents lies in the lack of a sound governance structure in many crypto institutions, leading to chaotic internal decision-making processes that are prone to single points of failure; especially when extreme market conditions arise, the chaotic decision-making further exacerbates risk accumulation. Additionally, these institutions have a singular approach to risk management and have not established a comprehensive risk control mechanism. Under the influence of multiple factors, systemic risks ultimately erupted, leading to market cleanouts.

Odaily Planet Daily: Not only are there issues in CeFi, but the DeFi sector has also been repeatedly plundered. What are the associated risks of DeFi?

Shen Yu: DeFi activities can be broadly categorized into two types: trading and lending. Such operations carry numerous risks, such as authorizing incorrect links, liquidation due to market fluctuations, protocols being hacked, internal personnel absconding with funds, and extreme market conditions causing users to be unable to withdraw funds due to complicated operations.

Odaily Planet Daily: Every crypto bear market reshuffles the entire industry landscape. Cobo has ample authority to speak on institutional management and market hedging. Can you share how Cobo has faced and overcome this round of crisis?

Shen Yu: On one hand, the rich DeFi experiences over the past two years have provided us with various insights. On the other hand, we have established a mature DeFi decision-making process and risk control management internally, filtering through layers to avoid systemic risks.

By leveraging the internal management tool Cobo Argus, we can decentralize role assignments among team members while maintaining efficiency. Through Cobo Argus, we also filter out a significant number of risky DeFi protocols, mitigating most of the risks. Therefore, we were not significantly affected during this downturn.

After the crisis, we still maintain good cash flow and a healthy investment portfolio.

Odaily Planet Daily: Besides decentralization, what specific functions can Cobo Argus achieve? Can you elaborate on how it mitigates DeFi-related risks?

Shen Yu: The original design intention of Cobo Argus was to meet the needs of the Cobo team in interacting with DeFi protocols. During the DeFi Summer of 2020, we actively participated in various popular projects. As interactions increased, the needs of my team and I also evolved, such as the frequent need for reinvestment and high-frequency operations, which required some automation tools and scripts; additionally, the team-controlled wallets needed multi-signature settings while also considering efficiency.

At that time, there was a lack of specialized tools in the market, so the team began designing a set of infrastructure to meet the needs of institutional cryptocurrency users, ultimately developing the world's first DeFi Argus solution. After two years of development, Cobo Argus has gradually improved its functionalities, forming a complete workflow that aligns with DeFi, including pre-investment research, team due diligence, on-chain code audits, decentralized decision-making during operations, and post-event reviews and asset tracking after extreme security incidents.

Odaily Planet Daily: Cobo Argus was previously known as Cobo DaaS (DeFi as a Service) during its internal use phase. What are the differences in positioning and functionality between the two?

Shen Yu: Recently, as crypto institutions have frequently faced severe setbacks, we decided to upgrade our internal tool Cobo DaaS and launch the protocol tool Cobo Argus, providing other institutions and teams with secure and efficient access to blockchain protocols. Institutions and teams can use Cobo Argus for efficient team collaboration, role decentralization, on-chain risk alerts, and asset management.

To elaborate, during the rapid market fluctuations of the past few months, I found that many peers (institutions) actually have significant security risks in risk management and internal workflows. Therefore, we organized our system and productized it to help institutional users better manage internal assets and reduce risks. At the same time, we hope to attract some traditional finance clients from outside the crypto space.

Odaily Planet Daily: So, is the target user of Cobo Argus both crypto-native institutions and traditional financial institutions? What special needs do they have? Can Cobo fully explore and expand the 2B market through this service?

Shen Yu: Yes. Taking traditional institutions as an example, their demand for crypto assets mainly falls into two categories: first, traditional art institutions leaning towards NFTs, which possess a large amount of IP resources but are prone to security incidents when dealing with the crypto space. Cobo Argus helps these traditional art institutions better manage their on-chain assets; second, traditional financial asset management institutions, which have a strong interest in DeFi protocols and crypto finance. Cobo Argus can assist them in switching and arbitraging between the TradFi and DeFi worlds. By serving traditional institutions, we are also bringing incremental growth to the entire crypto industry.

Cobo Argus essentially aims to create a one-stop open platform, lowering barriers, helping institutions and teams with division of labor, and better managing on-chain assets while providing value-added services and improved risk control mechanisms.

Odaily Planet Daily: We understand that there are quite a few crypto financial services targeting institutional clients in the market. For instance, various wallet manufacturers offer security solutions for institutions, many data companies have launched professional dashboards and tools, and crypto-native enterprises have developed their own asset management systems over the past two years. How does Cobo Argus stand out compared to competitors?

Shen Yu: In summary, Cobo Argus's outstanding advantages include: high security, high scalability, value-added services, and efficient team collaboration support.

To be honest, the security of some self-developed asset management systems currently on the market is concerning; they are merely simple scripts, and in some cases, private keys are stored in hot storage on servers, with no separation between hot and cold wallets. Some even connect directly to unverified DeFi protocols via smart contracts, exposing significant security risks. Such systems are difficult to handle billions in assets.

Since its establishment, the Cobo team has been deeply engaged in the wallet sector, implementing a three-tier wallet architecture of cold, warm, and hot storage; especially in private key management, we have adopted a three-tier private key storage architecture with globally distributed storage. Over the past five years, Cobo has securely managed over $3 billion in crypto assets.

On this basis, Cobo Argus has undergone modular development, creating a multi-user, multi-permission system that achieves high scalability, including multi-signature systems, role systems, and risk control systems.

Thirdly, there are rich value-added services. For example, tools that enhance user yields, including mature trading strategies suitable for institutional users who do not deeply participate in DeFi protocols. Additionally, we have conducted extensive mining of on-chain data, and some key data will be organized into dashboards to assist relevant users in decision-making. We also aggregate various project information, including project security ratings, important community news updates, real-time security information updates, smart contract audits for upstream and downstream cooperative projects, and in-depth research reports related to projects, all of which comprehensively enhance users' perception and rapid response capabilities in DeFi.

Currently, Cobo Argus has launched a pilot trial version to the market (Trial Link), and the first 50 institutions have the opportunity to experience Cobo Argus services for free for three months.

Odaily Planet Daily: It seems that this set of measures effectively meets the diverse needs of both crypto-native institutions and traditional institutions. In actual business development, have institutional clients been engaged? Can you share some overall performance data of Cobo?

Shen Yu: On August 4, multi-signature wallet Gnosis Safe and Cobo reached a deep cooperation, and Cobo Argus's core component, Cobo Safe App, is officially recommended on their website. Gnosis founder Martin Köppelmann stated, "The collaboration between Gnosis and Cobo has great synergy, and I believe the Cobo Argus product can help solve many pain points in institutional decentralization and smart contract invocation processes."

In addition to Gnosis Safe, over the past five years, Cobo has gained the trust of more than 500 institutions and high-net-worth individuals globally, with cumulative assets under custody exceeding $3 billion and trading volume surpassing $100 billion. Moreover, Cobo has evolved from its initial wallet business into a comprehensive Web3 group that integrates custody (Cobo Custody), SaaS services (Cobo SaaS), institutional-grade DeFi services (Cobo Argus), and investment (Cobo Ventures).

Odaily Planet Daily: We noticed that Cobo's slogan has shifted from "Value Circulation, Mission Coin Achieved" to "Powering Your Crypto Ambitions." The launch of Cobo Argus seems to reflect Cobo's shift in focus towards empowering institutions. What direction will Cobo's next heavyweight product take?

Shen Yu: I can reveal a bit that after two years of in-depth research on on-chain contracts and assets, our team has identified some potential industry opportunities that may explode in the future, and we are currently developing some "out-of-the-box" new products that will be officially launched in the near future.

Odaily Planet Daily: Since we are discussing "potential industry opportunities," could you predict the future development direction of the crypto market?

Shen Yu: The market is currently in a state of recovery, and applications based on blockchain may experience a significant explosion in the next five to ten years, but there are two prerequisites: first, the underlying performance of blockchain must be able to support tens of millions of daily active users, primarily addressing scalability issues; second, blockchain products need to be more user-friendly, capable of accommodating a large influx of users and enabling seamless entry into the blockchain world.

This is precisely the direction Cobo Argus is attempting, aiming to eliminate the need for smart contract coding, allowing users to perform complex on-chain interactions simply by dragging and dropping, thereby lowering the entry barriers to DeFi.

Cobo Argus has already launched a pilot trial version to the market, and the first 50 institutions have the opportunity to experience Cobo Argus services for free for three months (click the link to try: https://argus-trial.cobo.com/).